POWER SECTOR’S POTENTIAL BEING ACTUALISED

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By KunleMogaji

The Nigeria’s power market is funda­mentally attractive for investment, given the country’s growing demand for electricity. Nigerians use far less electricity per capita than citizens of comparable economies in Africa – only about 151 kilowatt hours (kwh) per capita, compared with 4,326 kwh per capita in South Africa and 1,697 kwh in Egypt.

The power sector offers significant long-term opportunities for bold investors as the Nigerian economy strives to evolve from its frontier status to an emerging economy.

With urbanization progressing at about 3.8 per cent annually, which is higher than the country’s annual population growth rate of three per cent, more than 60 per cent of Nigerians are projected to live in cities by 2030 pushing up demand for electricity in the residential areas.

The country’s growing middle class estimated at 23percent of the population and youthful population further add up to the robust energy consumption outlook.

In spite of these opportunities, investors are wary about the viability of the electricity market in Nigeria for several reasons. The biggest of these is the financial viability of the distribution companies, which suffer large losses across the distribution system, for both technical and commercial reasons.

This has significantly impaired the ability of the generating and distribution companies to recover all costs and generate appropriate returns on investment.

The electricity grids in developed markets expect losses below 15 per cent, but the losses by Nigeria’s utilities over the past five years has been as high as 30 per cent. About one-third of that loss is technical, but the rest is lost to pilferage.

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